Fiscal plan: Obama ready to compromise but insists on tax hike for rich

President Barack Obama said on Friday he was prepared to compromise with Republicans to avert a looming US fiscal calamity, but insisted a tax increase for the rich must be part of any bargain.

Obama, who was re-elected on Tuesday, reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls. His spokesman said he would veto any deal that did not include an extra contribution from the wealthiest.

Obama invited congressional leaders to the White House next Friday to discuss the issue, the most pressing challenge as the president prepares to starts his second term in office.

Earlier on Friday, John Boehner, the Republican speaker of the House of Representatives, repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the crisis.

He too claimed a mandate from the elections, in which voters gave Republicans continued control of the House.

The statements showed the two men, who have been divided on the issue for two years, were still far apart, leaving doubts over whether the "fiscal cliff" could be averted. Congress is expected to address it when it reconvenes next week for a post-election lame-duck session.

"Boehner and Obama are using softer tones, but the substance of what they're saying hasn't changed very much, and it doesn't look like there's been any movement from the last time they had a budget discussion," said Stan Collender, a former congressional budget aide.

The automatic across-the-board budget cuts due in January were scheduled in August 2011 as part of a deal to raise the US debt ceiling. Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.

In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan.

"I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said. "I'm committed to solving our fiscal challenges, but I refuse to accept any approach that isn't balanced."

Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession. AP

"If we're serious about reducing the deficit, we have to combine spending cuts with revenue. And that means asking the wealthiest Americans to pay a little more in taxes," he said.

Obama said the majority of Americans believed those making more than $250,000 a year should pay more taxes, "So our job now is to get a majority in Congress to reflect the will of the American people. I believe we can get that majority."

"I was encouraged to hear Speaker Boehner agree that tax revenue has to be part of this equation," he added.

While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans.

"I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night, we found out that the majority of Americans agree with my approach," he said.

Tax cuts for people of all incomes enacted under President George W. Bush are due to expire in January and Obama said he was willing to extend them for those making less than $250,000 immediately but not for those making more. His spokesman, Jay Carney, said Obama would veto any bill that extends cuts for the top 2 percent of wage earners.

MARKETS WORRIED

Concerned that U.S. growth might stall if the fiscal cliff becomes reality, financial markets at home and abroad are paying close attention to the political wrangling. U.S. stocks cut gains on Friday after Obama spoke.

Britain's top shares fell on Friday, as worry over the U.S. fiscal cliff overshadowed robust U.S. consumer sentiment data. The FTSE 100 index closed down 0.1 percent.

Boehner called on Obama to play a more active role in addressing the issue.

"This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.

Top Senate Republican Mitch McConnell named taxes as the main bone of contention.

"I was glad to hear the president's focus on jobs and growth and his call for consensus. But there is no consensus on raising tax rates, which would undermine the jobs and growth we all believe are important to our economy," he said.

While disagreeing on immediate measures to avert the fiscal crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of U.S. tax laws.

Obama sent a signal to Republicans of a willingness to compromise by calling for reduction in healthcare costs including in federal programs for the poor and the elderly, a favorite issue of fiscal conservatives.

"I intend to work with both parties to do more - and that includes making reforms that will bring down the cost of healthcare so we can strengthen programs like Medicaid and Medicare for the long haul," he said.

The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9 percent. The rate is now 7.9 percent.

It also warned of a crisis if the United States did not stem the growth of its exploding deficit.